Market opportunity analysis. It is the cornerstone of any successful business venture. Ideas can sprout up when you least expect it – the shower is always good for a quality brainstorming session – but that doesn’t necessarily mean it is time to harvest. Some ideas are worth picking, others are best forgotten about.
Yet, how do you decide which ideas are worthwhile?
That is where market opportunity analysis comes in. This form of research allows you to further investigate your ideas. It ensures you avoid traversing down any paths that only burn up your finances, and instead select the routes that promise the most profits.
Market opportunity analysis is important. That is clear. What is less clear is how to actually perform this type of analysis. Fortunately, you have landed in the right page. I will explain, in detail, how to do market opportunity analysis successfully.
What is market opportunity analysis?
Hold up. Let’s just put the brakes on before discussing the “how” part of this guide. Because it is important to have a firm understanding of what is market opportunity analysis before anything else.
So, what is it?
A simple market opportunity definition is that it is a process where you research an idea, determining if it is worthwhile in terms of gaining customers and growing profits.
Of course, there is more to the process than that. The analysis involves various elements, including audience research, identifying your competitors, and spotlighting possible risks.
By performing research into market opportunities, you can prioritize business ideas. The analysis provides information on how potentially lucrative and risky these opportunities are, and you can pick and choose which ideas are best to turn into a reality.
What is an example of market opportunity analysis?
While the process behind market opportunity analysis doesn’t typically deviate, opportunity types come in all different shapes and sizes. Tech companies can look at new software features. Manufacturers may explore if a change in material will improve their product and profit margins. A marketing agency might explore adding video production to its range of services.
We could continue listing market opportunity examples until the cows come home. However, let’s take a closer look at a specific case.
Using Amazon as an example.
For this example, say you’re an Amazon seller in the food gift industry. Finding opportunities – aka new products – is essential to be successful on the platform. So, you have come up with a new idea: a hot sauce collection.
Before you begin procuring different bottles of hot sauce for this bundle, market opportunity analysis will reveal if this is an idea worth pushing forward with – or one that should be left at the brainstorming stage.
That is when the research begins. Primary and secondary research methods can be used to learn more from potential customers, seeing if your hot sauce collection is something they’d be interested in purchasing.
Competitor analysis will also reveal if the market is overly saturated or if there is enough space for your new product to thrive. You’ll also look at factors such as trends, marketing opportunities, and your own resources.
In the end, you decide that a hot sauce collection isn’t viable for your business. While data may show the market for hot sauce isn’t disappearing anytime soon, you feel there are too many competitors already – and your product idea isn’t unique enough to stand out from the crowd. As a result, you see it as an opportunity that carries more risk than reward.
Admittedly, that is not the most positive example, but analyzing a market opportunity isn’t just about identifying ideas with great potential. It is also vital to scratch off ideas that could cause more trouble than they’re worth.
5 steps to conducting a market opportunity analysis.
Okay, so you are ready to go. It is time to begin your own market opportunity analysis. To make it a reality, here are five key steps to follow to complete the process successfully.
1. Find potential opportunities.
Obviously, you cannot conduct a market opportunity analysis without an opportunity to analyze.
There are different types of opportunities, such as product opportunities. That said, it is not necessarily just about considering a new product like the example above.
An opportunity could be identifying a new market to expand into, for instance, or the possibility of acquiring or partnering with another business. Ideas might not simply appear out of thin air, either. They could be dictated by current events and changes in trends.
An opportunity for your business could help to:
- Pivot and change the direction of your operations.
- Expand by exploring new markets.
- Invest and increase current resources and employee numbers.
- Create new products and services.
Once you have picked opportunities to explore, It is time to put in the research and learn their viability.
2. Learn about your target audience.
You should already have a fair idea about your target audience for current operations. However, it is important to reassess your target customers when exploring a new market opportunity. This is certainly the case when venturing into an entirely new market.
There are many aspects to ponder when learning about your target audience. Does your product/service meet their requirements? What factors into their purchasing decisions? Are they willing to spend what you seek for this idea?
Numerous methods are available to learn more about your target audience. You can take a direct approach and conduct focus groups, surveys, and interviews.
This route is useful if you are already in possession of a dedicated customer base. Their opinions should always be considered before adding new products or making sweeping changes to your business.
There is also ample existing data available for your secondary research efforts. The issue: compiling and analyzing this data can be tricky and time-consuming.
This is why it is essential you use the right tools for data analysis. Here are some important pieces of software to add to your repertoire:
Online reviews are home to some of the most valuable, juicy data for any business. Yet, if you have many products with numerous reviews, scouring through these to spot common themes – and, as a result, opportunities – is a process that can eat up a lot of time.
GapScout eliminates that pain point and possible human error. With AI technology, this solution gathers reviews, identifies opportunities desired by customers, and does it all in a fraction of the time when done manually.
You are likely aware of the power you can yield when using Google Trends. After all, Google is the central hub of information for, well, everything on the internet.
With Google Trends, you can learn exactly what people are thinking and searching about right now. Add in that it is both free and easy to use, and this should be one of the first tools you add to your market analysis collection.
Answer the Public
Another free tool, Answer the Public, might not be as popular as the aforementioned Google Trends, but don’t let that fool you. It is an excellent way to learn further about your target market.
Simply type in any keywords which have relevance to your business, and Answer the Public will share an assortment of related searches. The result: you gain unique insights about consumer behavior, the type that can help with your market research.
SEMrush is an all-in-one tool that is often the number one choice for marketing professionals. Keyword Analytics, Audience Insights, and Topic Research are just three of the solutions that are part of SEMrush, and they all help with learning more about your target market. The same can be said for the Market Explorer tool, where you’re able to discover key demographics about your audience.
Add all of this to your website and social media analytics, and you should acquire enough data to understand your audience – and learn if your market opportunity will both grab their interest and get them to part with their cash.
3. Research your competitors.
Research doesn’t stop at your audience. You also have to perform a deep insight into your competition.
Competitor research is vital in gaining a true grasp of the market you’re planning to enter. What relevant products currently exist in this market? How crowded is this market? What is the market share? These are the types of questions that require answering before moving on.
When performing competitor research, think about the following points:
- Value proposition: You need to determine the unique value proposition of the competition’s products and services.
- Spot the difference: See how your potential product differs from what is currently available.
- Review analysis: Read reviews to find out what customers are saying about the competition’s products/services. This can reveal pain points that you may be able to solve with your own offerings. Note: remember to use GapScout for this analysis!
- Social media feedback: Find out what people are saying about the competition on social media. Are people happy with your competitors? Perhaps they’re requesting a certain feature or new product?
- Newcomers: You’re not the only one planning to enter the market. However, you need to try and establish how many new competitors will enter the fray. Will you be able to grab a big enough share of the market, even if it becomes more and more saturated?
4. Analyze external factors.
The next step in the process is to think about external factors that can affect your market opportunity. Say you have the idea to launch a new product on Amazon. It ticks all the boxes in terms of customer and competitor research.
Trends suggest your product will receive a generous amount of traffic. Sadly, economic issues – one of the five main external factors – have put your idea on ice.
That is how quickly an external factor can influence your plan. As mentioned, there are five external factors you need to focus on. These are:
- Social: A cultural change due to social factors can impact your idea. These changes may lead to a market sector opening up that didn’t previously exist. Alternatively, a new trend could be lucrative at first, but it might disappear just as soon as it arrived.
- Technical: The market can be influenced due to technological advancements. Have there been new innovations that have led to your product idea being left behind? Perhaps you can benefit from new technologies, allowing you to add new features or reduce manufacturing costs?
- Economic: It is no secret that economic factors will play a large role in whether your market opportunity is feasible. You need the money to finance this idea. If you don’t have this funding readily available, will you be able to secure financing elsewhere? You also have to consider the finances of your target customers. If the economy is on a downturn and there is less disposable income, you could struggle to generate the necessary sales.
- Ecological: Sustainability is a large issue in the world of business right now. Will your idea have a positive or negative impact on the environment? Are there ways to make your product or service more eco-friendly?
- Political: It may not seem like a big issue, but the political climate is a big factor in certain industries. On the positive side, your business could potentially benefit from incentives like grants and tax breaks. Conversely, regulatory issues might negatively impact everything from production to profits.
5. Analyze internal factors.
The last step of your market opportunity analysis shouldn’t take as long, but it is just as important as the previous ones. You have to be honest about the current capabilities of your business.
Workforce, skills, technology, finances – do you have the necessary combination of these internal factors to complete your idea successfully? You can identify a great opportunity, but that does not mean you can afford to put it into action.
Selecting the right opportunities.
Market opportunity analysis is not an easy or straightforward process. However, it won’t take long to realize which ideas are worth pursuing further – and which should end up in the trash.
Either way, putting in the work from the start will benefit your business in the long run. You will identify the right market opportunities that can help add sales, bring in extra revenue, and grow your company.
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